Bank servicers initiated more trial modification plans, and initiated fewer foreclosure actions in the fourth quarter than the previous one, according to a new report from the Comptroller of the Currency.
The agency's 'Mortgage Metrics Report' released Wednesday shows that nine well known megabanks regulated by the OCC started 210,200 trial modifications in 4Q, a 34% increase from the third quarter. The nine also initiated nearly 292,200 foreclosures, a 16% drop from 3Q.
OCC mortgage expert Bruce Krueger attributed this shift to on-going efforts to stop 'dual tracking' where the foreclosure process is initiated while a borrower is being considered for a modification or other option to keep them in their homes.
Krueger also noted these nine servicers had knowledge of the outline of the robo-signing settlement with the state attorneys general and started taking some borrowers out of the foreclosure process, evaluating them for a foreclosure prevention option. Four of the OCC servicers signed the settlement with the state AGs.
The nine OCC-regulated servicers include: Bank of America, JPMorgan Chase, Citibank, HSBC, MetLife, PNC, U.S. Bank, Wells Fargo and OneWest Bank. Combined, they service 60% of all first lien mortgages in the U.S.
In a press briefing with reporters, Krueger said he is seeing an increasing use of principal reduction by banks in modifying loans in their portfolios and where they have the investor's permission to write down a portion of the principal.
In the fourth quarter, servicers employed principal reduction in modifying 25% of portfolio loans and 16% of investor loans, the agency found.
The percentage of principal reduction is higher under the Home Affordable Modification Program. "OCC has long held the position that principal reduction can be an effective tool in the arsenal for loss mitigation," Krueger said.
